“Fiscal Risks: Sources, Disclosure and Management” Ricardo Velloso, Deputy Division Chief, Fiscal Affairs Department, International Monetary Fund This session will cover main sources of the fiscal risks, their magnitude in advanced, emerging and developing countries, as well as key principles in management of fiscal risks. Mr. Velloso will also introduce some good practices in fiscal risk disclosure.

1. Fiscal Risks Sources, Disclosure and Management Ricardo Velloso Fiscal Affairs Department, IMF Presentation at 2009 ICGFM Miami Conference May 21, 2009

5. How Large Are Fiscal Risks? Surprise Deviations in Debt/GDP

6. How Large Are Fiscal Risks? Surprise Deviations in Balance/GDP

7. Surprise Deviations in Balance/GDP

9. Currency Crises (depreciation by at least 25 p.p. and at least 10 p.p. greater than the previous year)

10. Oil Exporters: Years of Oil Price increase

12. Fiscal Costs of Banking Crises Gross costs vs. Net costs Recovery rates: fiscal risks on the asset side

13. Banking Crises: Net Fiscal Costs (in percent of GDP)

14. Banking Crises: Recovery rate (recovery as a share of gross fiscal costs)

19. Contingent Liabilities Contingent Liabilities Explicit (obligations based on contracts, laws, or clear policy commitments). Implicit (political or moral obligations, rather than contractual) Guarantees (loan; trade and exchange rate; minimum pension; income, profit and rate of return guarantees under PPPs) Bailouts (of public enterprises, financial institutions, subnational governments, strategic private firms ) Natural disaster spending Legal claims against the state Natural disaster relief Other e.g. ideminities; insurance programs; uncalled capita l Environmental cleanup

24. Australia, Canada, Chile, Colombia, New Zealand, South Africa, US Chile, Colombia Chile, South Africa, US Australia, Brazil, Canada, Chile, Colombia, New Zealand, US Canada, New Zealand, US Australia, Chile Australia, Canada, New Zealand Australia, Canada, New Zealand Chile, Pakistan, US Maximum authorized, face value, expected loss (annual & NPV), unexpected loss (annual & NPV; 95% & 99% probability), details of guarantee and guaranteed loan (maturity, currency, interest) Face value SELECTED COUNTRIES QUANTIFIABLE INFO DISCLOSED Maximum loss, expected loss (annual & NPV), unexpected loss (annual & NPV; 5, 50, 95, 99% probability), evolution of NPV expected costs Face value, expected payments (annual & NPV), calls on past guarantees Face value (amounts claimed), expected losses (annual, NPV), range of expected losses, unexpected losses (99%), past success rates Expected costs Quasi-fiscal deficit and capital position of CB; guaranteed CB liabilities Description of liability Fiscal cost of past banking crisis, past costs of stabilizing fuel prices CL Disclosure in Practice What countries disclose Loan Guarantees Guarantee and Insurance Programs Infrastructure Guarantees Pension Guarantees Lawsuits Environmental Liabilities Callable Capital (International Org.) Quasi-fiscal deficit Central Bank Implicit Liabilities Unquantifiable Liabilities